New Zealand employment law appears complex and confusing when looking from an outside view although in some ways there are many similarities to other countries. There are specific regulations on employment contracts, leave and pension contributions that must be understood fully. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in New Zealand.
There are several key areas to be aware of within New Zealand’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the New Zealand laws and rules for both New Zealand employees as well as foreign nationals.
New Zealand has traditionally had a workforce skilled in construction and production but there has been a long-standing shift towards employment in the services sector. A state-operated social welfare system provides benefits during sickness, unemployment, disability and retirement and is funded by general taxation.
Every employee in New Zealand must have a written employment agreement that is agreed upon and signed by an employee before they start work. Employment agreements come in a variety of shapes and sizes depending on the job description, but there are certain mandatory clauses that every employment agreement must contain by law.
Under the Act, there are two types of employment agreements that cover all employees, regardless of profession or industry. These are individual employment agreements and collective agreements.
The official site for Employment Law in New Zealand is http://www.dol.govt.nz/
|Severance / Redundancy Pay ?||
There is no statutorily defined severance or redundancy pay scheme in New Zealand. Therefore employees are only entitled to severance pay or redundancy payment if it stipulated in the employment agreement.
|Termination of Employment ?||
Notice periods are not defined at law and instead should be ‘reasonable’. Generally a notice period should be specified in the employment contract and agreed upon by both parties. The notice period can be different for the employment period and the trial period. According to the NZ Consumer Affairs Bureau: “most employment agreements used by an employer may include a four weeks’ notice of dismissal clause in most of their employment agreements, but only two weeks’ notice for someone employed on a trial period“.
In a trial period, an employer may terminate without needing a reason, and the employee cannot file for unfair dismissal on personal grounds, e.g. unless it is for something such as unlawful discrimination based on gender or race.
Companies entering New Zealand can make a decision whether to use their own resources or to use a Global Employment Organization to handle employment and payroll responsibilities. A GEO solution is particularly beneficial when a company is looking to setup an office quickly with a manageable cost. The complexity of employment regulations in New Zealand makes the use of a GEO advisable to ensure full compliance with employment laws, including the drafting of local employment contracts for workers.
The company that is expanding into New Zealand contracts with the GEO to employ and payroll their staff on their behalf. The GEO then assumes the legal responsibility for these employees, sponsoring them on work permits if necessary, complying with local employment law and running their monthly payroll. This is especially useful to fulfill all of the specific withholding requirements for pensions and benefits, as well as documenting termination, probation periods and leave requests.
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